Ongoing dynamic earnings performance of the Salzgitter Group in the summer quarter

  • All business units deliver profits before taxes in the period under review
  • More than € 100 million in profit improvement potential realized
  • Guidance for the full financial year 2018 affirmed

The economic environment in the first three quarters was characterized by European steel producers’ good order book position, boosted by demand. At the same time, and as a consequence of US trade policy, imports from non-EU countries into the EU climbed to a record level, which therefore exerted a negative impact on the EU steel market’s volume structure. In order to avert the risk of endangering the balance of the European steel market in the future as well, the final implementation of the defense measures provisionally implemented by the EU Commission in July is imperative.

With earnings before taxes of € 284.6 million, the Salzgitter Group significantly outperformed the result achieved in the first nine months of 2017 (€ 174.5 million). Along with the dynamic earnings performance of the Strip Steel Business Unit, this outcome was attributable to the turnaround in the Plate / Section Steel Business Unit, in particular thanks to the gratifying improvement in the result of Peiner Träger GmbH. The Mannesmann and Technology business units increased their respective pre-tax earnings, while the Trading Business Unit delivered another very presentable contribution, although below the outstanding previous year’s figure.

“The result of the first nine months of 2018 underscores the validity of the way in which we have promoted the development of the Salzgitter Group. This consistent implementation is reflected by around € 100 million in additional profit improvement potential realized for the first time in the period under review. For this reason as well, we are looking at our Group’s fifth earnings increase in a row in the current financial year. We are largely optimistic about the framework conditions in the coming months while, however, not forgetting that forecasting reliability is likely to deteriorate given the manifold challenges,” says Chief Executive Officer Prof. Dr.-Ing. Heinz Jörg Fuhrmann.

In the first three quarters of the financial year 2018, the Salzgitter Group’s external sales remained virtually stable compared with the year-earlier figure (€ 6,931.2 million; 9M 2017: € 6,813.2 million). The growth in the sales of the Strip Steel Business Unit, above all on the back of selling prices, more than compensated for the decline in the Trading Business Unit. The pre-tax profit of € 284.6 million (9M 2017: € 174.5 million) includes € 29.2 million in after-tax contribution from a participating investment in Europe’s leading copper producer Aurubis AG, a company included at equity (9M 2017: contribution of Aurubis investment: €–8.7 million, incl. €–80.0 million in valuation effects from the bond convertible into Aurubis shares at the time). The after-tax result stood at € 194.0 million (9M 2017: € 112.6 million). Earnings per share therefore came in at € 3.51 (9M 2017: € 2.01) and the return on capital employed stood at 11.6 % (ROCE 9M 2017: 7.9 %). With an equity ratio of 36.4 % and a net financial position of € 177.9 million (2017/09/30: € 131.8 million), the Salzgitter-Group continues to enjoy a comfortable financial basis and sound balance sheet.

Outlook

Salzgitter AG affirms its guidance for the financial year 2018 that was revised upward on September 19, 2018. As before we anticipate:

  • a slight increase in sales to above the € 9 billion mark,
  • a pre-tax profit of between € 300 million and € 350 million and
  • a marginally higher return on capital employed of between 9 % and 11 % compared with the previous year (8.6 %).

The complete report released on the results of the nine months of 2018 can be viewed at: https://www.salzgitter-ag.com/en/investor-relations/news-and-publications.html

We make explicit reference to the fact that imponderables, including changes in the cost of raw materials, precious metal prices and exchange rates, may have a considerable impact over the course of the financial year 2018. The resulting fluctuation in the consolidated pre-tax result may be within a considerable range, either to the positive or to the negative. The dimensions of this range become clear if one considers that, with around 12 million tons p.a. of steel products sold by the Strip Steel, Plate / Section Steel, Mannesmann and Trading business units, an average € 25 change in the margin per ton is sufficient to cause a variation in the annual result of more than € 300 million.

Disclaimer:

Some of the statements made in this report possess the character of forecasts or may be interpreted as such. These are made to the best of the Company’s knowledge and judgment, and by their nature are subject to the proviso that no unforeseeable deterioration occurs in the economy or in the specific market situation pertaining to the business units’ companies, but rather that the underlying bases of plans and outlooks prove to be accurate as expected with regards to their scope and timing. Notwithstanding prevailing statutory provisions and capital market law in particular, the Company accepts no obligation to continuously update any forward-looking statements that are made solely in connection with circumstances prevailing on the day of their publication.

Source: Salzgitter Group

Tata Steel reports consolidated financial results for the quarter and half year ended September 30, 2018

Highlights of the quarter:

  • Consolidated revenues increased to Rs.43,544 crores as compared to Rs.37,833 crores in 1QFY19 and Rs.32,464 crores in 2QFY18
  • Consolidated EBITDA increased to Rs.9000 crores as compared to Rs.6,515 crores in 1QFY19 and Rs.4,664 crore in 2QFY18; consolidated EBITDA margin stood at 21% and EBITDA/t was Rs.12,131
  • Consolidated PAT improved to Rs.3,116 crores as compared to Rs.1,934 crores in 1QFY19 and Rs.1,018 crore in 2QFY18
  • Tata Steel India deliveries (Tata Steel standalone and Bhushan Steel) stood at 4.32 million tons; India deliveries now contributes 58% of total group deliveries
  • Standalone EBITDA increased to Rs.6,113 crores compared to Rs.5,118 crores in 1QFY19 and Rs.3,408 crores in 2QFY18; EBITDA margin was 34% and EBITDA/t was Rs.19,244/t
  • The liquidity position of the group remains robust at Rs.26,470 crores comprising of Rs. 14,478 crores in cash and cash equivalents and Rs.11,992 crores in undrawn bank lines
  • Gross debt during the quarter increased by Rs.2,065 crores, primarily due to adverse forex impact of Rs.3,528 crores. Net debt was flat at around Rs.1,04,202 crore
  • Health and Safety: Lost time injury frequency rate per million man hours worked (LTIFR) of Tata Steel group reduced to 0.44
  • Consolidated deliveries grew by 13%QoQ and 15% YoY to 7.42 million tons

Tata Steel Standalone and Consolidated Highlights

 Standalone  Consolidated ¹  
2QFY191QFY192QFY182QFY191QFY192QFY18
Production (mn ton) ²3.263.183.27.266.986.41
Deliveries (mn ton)3.182.973.087.426.556.45
Turnover179021640514221435443783332464
EBITDA ³611351183408900065154664
PBT before exceptional items504439082003528433842170
Exceptional Charges-28-335-27164-344-45
PAT from Continuing Operations32682318129431221937988
PAT from Discontinued Operations----5-330
Reported PAT (A)326823181294311619341018
Other Comprehensive Income (B)-722-81-18111747-4234
Total Comprehensive Income (A+B)32612341121313053681-3217
Diluted EPS (Rs.)28.1319.8512.1431.0616.669.34
(Figures in Rs. crore unless otherwise specified)

1. Bhushan Steel financials are consolidated from 18th May, 2018
2. Production numbers for consolidated financials are calculated using Crude steel for India, Liquid steel for Europe and saleable steel for SEA
3. EBITDA restated to exclude share of JV and Associates.

Key Operating and Financial Highlights:

Tata Steel Standalone operations:

  • Total deliveries grew by 7%QoQ to 3.18 million tons in 2QFY19 which was stronger than the domestic steel market demand growth of 2.1%QoQ.
  • Automotive segment sales increased by 21.6%YoY ; Industrial Products and Projects segment sales grew by 14%QoQ and 7%YoY with 74%YoY growth in engineering segment; Branded products, Retail & Solutions segment sales grew by 2.1%YoY with 20%YoY growth in ‘Astrum’ sales.
  • Standalone revenues increased by 9%QoQ and 26%YoY to Rs. 17,902 crores driven by higher volumes and better realisations.
  • Standalone EBITDA increased significantly to Rs.6,113 crores, up by 19%QoQ and 79%YoY. Standalone EBITDA margin for the quarter stood at 34%; EBITDA/t for the quarter stood at Rs.19,244/t
  • Tata Steel remains focused on operational efficiencies and minimizing environmental impact. Tata Steel Jamshedpur continues to be the benchmark in India for Coke consumption rate & Pulverized Coal Injection usage. It has also been able to increase solid waste utilization to 95% in 2QFY19.

Tata Steel Europe operations:                                                                                        

  • Liquid steel production was lower by 14%QoQ and 7%YoY at 2.43 million tons; production was impacted by two unplanned outages at IJmuiden; and by planned shutdowns for ongoing upgradation program and annual maintenance.
  • Deliveries were down by 7%QoQ and 13%YoY to 2.27 million tons; primarily due to lower production and seasonality.
  • EBITDA, for the quarter, decreased to Rs.1,111 crores compared to Rs.1,667 crores in 1QFY19, however, it was better than Rs.732 crores in 2Q FY18.
  • Tata Steel Europe continues to strengthen sales mix. It launched five new products during the quarter; higher-value differentiated product sales exceeded 41%.

Bhushan Steel operations:

  • Bhushan Steel’s total deliveries jumped 34% QoQ to 1.14 million tons as improved marketing strategy helped in inventory reduction. Revenue increased to Rs.5,862 crores as compared to Rs.4,624 crores in 1QFY19. EBITDA for the quarter increased Rs.1,173 crores with EBITDA per ton at Rs.10,291/ton.
  • The integration of Bhushan Steel is progressing well; our focus is on improving maintenance and safety practices at the plants which will improve plant reliability and help ramp up volumes.

Tata Steel South-East Asian operations:

  • Revenues improved by 14%QoQ and 22%YoY to Rs 2,963 crores, primarily on account of improved deliveries at Nat steel and better realizations at both Nat Steel and Tata Steel Thailand.
  • EBITDA was steady Rs.112 crores in 2QFY19.

Key corporate developments:

  • Tata Steel signed definitive agreement to acquire Usha Martin Limited’s steel business comprising 1 MTPA long products manufacturing capacity, an operating iron-ore mine, an under-development thermal coal mine and captive power plants. This acquisition provides a rich basket of long products comprising wire rods, specialty bars, and blooms. Tata Sponge Iron Limited, a subsidiary of Tata Steel, is carrying out this acquisition.
  • Tata Steel Kalinganagar (TSK) Phase II expansion project is on track; work has started on the Cold Rolling Complex which will help in enriching our product mix and optimizing cashflows. The Enabling work on rest of the project is also on advanced stage. Total estimated project cost is Rs. 23,500 crores, including Rs.16,000 crores up to HRC stage. The project also includes raw material handling facilities, a state-of-the-art 2.2 MTPA cold rolling complex and other downstream facilities.
  • Tata Steel and thyssenkrupp AG signed definitive agreements to form a 50:50 joint venture in Europe and both partners are working together to secure the required regulatory approvals. On 30th October, the European commission announced that it has commenced a Phase II review.
  • Tata Steel has concluded the acquisition of 51% equity stake in Creative Port Development Private Limited, which is developing Subarnarekha Port in Odisha.
  • TS Global Minerals Holdings Pte Ltd entered into an agreement to divest its stake in its wholly owned subsidiary Black Ginger 461 Pty Ltd, which holds 64% in Sedibeng Iron ore Pty Ltd, South Africa, to IMR Metallurgical Resources AG, a global metals and mining group.

Management Comments:

Mr. T V Narendran, CEO & Managing Director:

“Tata Steel Group has delivered extremely strong results this quarter driven by robust operational performance and favorable business conditions in India.  This quarter, despite a seasonally weaker period, we sold 4.32 million tons across Tata Steel Standalone and Bhushan Steel. This demonstrates our strong customer relationships and the strength of our marketing franchise. We continue to work on our strategy of increasing our Indian footprint as we ramp up operations at Bhushan Steel and implement our 5mtpa expansion at Tata Steel Kalinganagar. In line with this, we have also signed definitive agreements to acquire the 1mtpa steel business of Usha Martin which will strengthen our longs products capability. We are making good progress on the TSE ThyssenKrupp JV. We are in discussions with the European Commission for the phase II review which typically takes 90 days.

While we are positive on steel demand outlook especially in India, the risk of trade wars and increasing imports remains a concern.”

Mr. Koushik Chatterjee, Executive Director and CFO:

“This has been one of the best ever quarter for Tata Steel India on the back of strong operating and market performance with the EBIDTA margin of 34% and in excess of Rs.19,000 per ton and a Profit After Tax of Rs.3,268 crores. The Bhushan Steel integration and synergies have been on track and that is reflected in the Bhushan Steel EBIDTA margin of Rs 10,291/t. On the back of a strong India performance, the consolidated results of the company for the quarter reported 20% EBIDTA margin despite a operationally weak quarter in Tata Steel Europe due to unplanned shutdowns and stoppages both in Ijmuiden and Port Talbot. While Ijmuiden has come back to its normal level of operations, the Blast Furnace 5 in Port Talbot is undergoing major repairs for life extension and will be out operation for this quarter. The consolidated revenues improved by 15% sequentially and 34%YoY, to reach Rs. 43,544 crores while EBITDA surged to Rs. 9000 crores, a growth of 38% sequentially and 93% YoY.  The consolidated Profit after Tax was Rs. 3,116 crores, a sequential growth of 61%. During the quarter, Tata Steel Group generated operating cash flows of Rs. 7,769 crores. The liquidity position of the Group remains strong at Rs. 26,470 crores, including Rs. 14,478 crores of cash and cash equivalents. Tata Steel will financially support Tata Sponge in the rights issue that will be used for the acquisition of the Steel Business of Usha Martin which has yesterday obtained shareholder approval.  One of our key priorities going forward is to reduce our leverage by around a billion dollars in the next 12 months from the internal cash flows and other strategic initiatives on the portfolio.”

Disclaimer:

Statements in this press release describing the Company’s performance may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results may differ materially from those directly or indirectly expressed, inferred or implied. Important factors that could make a difference to the Company’s operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in or due to the environment, Government regulations, laws, statutes, judicial pronouncements and/or other incidental factors.

Source: Tata Steel

Vacuum degassing plant and continuous bloom caster from Primetals Technologies brought into operation for Changzhou Eastran

  • VD twin vessel plant has a capacity of 75 metric tons
  • Objectives are further improvement of the steel quality and reduced working costs
  • Hydrogen content reduced to less than 1.3 ppm and nitrogen to less than 50 ppm
  • Continuous bloom caster produces 800,000 metric tons per annum for automotive applications
  • Dedusting system improves environmental quality

A twin vacuum degassing plant (VD) and a continuous bloom caster supplied by Primetals Technologies have been brought into operation at the Chinese special steel producer, Changzhou Eastran Special Steel Co. Ltd. (Changzhou Eastran). The VD plant has a capacity of 75 metric tons. The vacuum treatment reduces the hydrogen content to less than 1.3 ppm and the nitrogen content to less than 50 ppm. The objective is to improve the steel quality even further. The five-strand continuous caster is designed for an annual production of 800,000 metric tons of steel for applications in the automotive industry. It casts blooms for pipes, spring and bearing steels. A dedusting system improves the environmental conditions on site and the new plants also reduce operating costs. Primetals Technologies received the order at the beginning of 2017.

Changzhou Eastran is part of the Changzhou Eastran Group and operates a plant in the town of Changzhou in Jiangsu Province, Eastern China, producing special steels, including bearing and tool steels. The new plant replaces obsolete equipment.

Primetals Technologies designed all the mechanical and electrical equipment for the VD plant, and supplied core components, including the vacuum pump, filters and gas cooler. The vacuum pump itself was manufactured in Germany and procured from Leybold. The system was integrated in a Leybold workshop in Tianjin.

The five-strand continuous bloom caster is equipped with a curved pipe mold. The machine radius is ten meters and the metallurgical length around 20 meters. It casts high-carbon steels at speeds from 1.05 to 1.5 meters per minute and produces blooms with a square cross-section of 200 x 200 millimeters. Production can be extended to include other rectangular and round cross-sections.

Primetals Technologies was responsible for the basic and detailed engineering, as well as for manufacturing molds, oscillators and segments. Primetals Technologies installed a number of technology packages to ensure not only a trouble-free casting process, but also blooms with high surface and interior qualities. The packages included the DynaFlex mold oscillator and straightening units with DynaGap Soft Reduction. Primetals Technologies also supplied the systems for the basic automation (Level 1). DynaGap Soft Reduction in combination with the Dynacs 3D cooling model enables blooms to be cast from high-quality pipe grades and other upmarket steels. Primetals Technologies also supervised the installation and commissioning of the continuous caster, and trained the customer’s personnel.

Vacuum degassing plant (VD) from Primetals Technologies not bloom caster
Vacuum degassing plant (VD) from Primetals Technologies

Source: Primetals Technologies

Acciaieria Arvedi issues final acceptance certificate for electric arc furnace from Primetals Technologies

  • Production capacity up to 1.4 million metric tons per annum
  • Integrated dedusting and heat recovery system improve environmental balance
  • Commissioned in just 31 days, two weeks before the agreed deadline

Acciaieria Arvedi S.p.A., an Italian steel producer, has issued Primetals Technologies the final acceptance certificate for a new electric arc furnace. The furnace was installed in the Cremona Steel Works. The production capacity is 1.4 million metric tons of crude steel per annum. The order also included a dedusting system for primary and auxiliary dedusting, and for supplementary extraction points. This is combined with a heat recovery system, which uses the thermal energy in the furnace offgases to generate steam, which is then used in the works’ three pickling plants.

The new 150-ton electric arc furnace from Primetals Technologies increases the production capacity of Acciaieria Arvedi, and reduces conversion costs. The tap-to-tap time is just 36 minutes and is supported by single bucket operation. This enables around 200 metric tons of crude steel to be produced each hour. The electricity requirement of the furnace lies between 340 and 350 kilowatt hours per metric ton. The necessary energy is provided via a transformer with a power of 155 MVA. The furnace is usually charged with a mixture of 65 percent scrap iron, 25 percent pig iron and 10 percent HBI (hot-briquetted iron). The scope of delivery also included five refining combined burner (RCB) systems, burners for post-combustion , a newly developed electrode control system (Melt Expert), the FluidGuard system – a comprehensive water leakage control system, and a new type of automatic tap hole filling. This increases safety as no personnel need to be near the furnace. Primetals Technologies also supplied a level 2 process optimisation system, well prepared for Industry 4.0.

An existing dedusting system was modified for the new electric arc furnace. The total extraction volume has been increased by installing an additional filter for both auxiliary and supplementary extraction points on the new electric arc furnace. The dedusting system meets the strictest European environmental requirements, as it achieves residual dust contents of less than five milligrams per standard cubic meter of air.

To optimise the energy balance of the plant, the waste heat from the electric arc furnace is recovered and is used to generate steam. Some 17  tons of steam are generated per hour from the energy recovered from the waste heat. This steam is used for the three pickling lines in the steel works. The energy recovery system replaces the existing gas boiler in the steel works, thereby reducing gas consumption and thus energy costs.

Acciaieria Arvedi S.p.A. is part of the Arvedi Group based in Cremona, Italy. The works has two production lines for flat products. In addition to the steel works for the production of liquid steel, there are two casting-rolling lines in operation. One of these lines uses the innovative Arvedi ESP (endless strip production) process and was realised in collaboration with Primetals Technologies. Production is mainly concentrated on special steels, in particular high-strength steels and dual-phase steel (DP), as well as thin and ultra-thin sheet metal, which can replace cold-rolled products in many applications.

Electric arc furnace from Primetals Technologies at the Acciaieria Arvedi plant in Cremona, Italy.

Source: Primetals Technologies

Bornay S.L. Trusts in High-Precision Tube Welding Line from SMS Group

Spanish welded steel tube specialist Bornay S.L. has ordered an HF (High Frequency) tube welding line, type RD 40, from SMS group for its Alicante works.
Bornay S.L. specializes in precision tubes and stainless steel tubes for the European, Latin-American and African markets and has over 50 years of experience working for different sectors, including the automotive, furniture and agricultural sectors

Spanish welded steel tube specialist Bornay S.L. has ordered an HF (High Frequency) tube welding line, type RD 40, from SMS group for its Alicante works. SMS group is the single-source supplier of all technical equipment from strip preparation to the cut-off-saw.

The new machine will produce round tubes with diameters from 10 to 40 millimeters and wall thicknesses from 0.75 to 4.5 millimeters, as well as squares in dimensions from 10 x 10 millimeters to 30 x 30 millimeters and rectangulars in dimensions from 20 x 10 millimeters to 40 x 20 millimeters with wall thicknesses ranging between 1.00 and 4.00 millimeters.

The tube welding line to be commissioned in the first quarter of 2020 will achieve a production speed of maximum 120 meters per minute. Here, Bornay can produce high-quality tubes with round, square and rectangular cross-sections. They can be used, among others, as precision tubes for the automotive sector, but also for metallic furniture or in the agricultural sector.

“Our requirements with regard to the new welded tube plant were very high since we produce tubes for mechanical applications that require a high level of precision in their finishing. The engineers from SMS group have designed a plant meeting our needs.” says Juan Bornay, Managing Director at Bornay S.L.

SMS group is a group of companies internationally active in plant construction and mechanical engineering for the steel and nonferrous metals industry. It has some 14,000 employees who generate worldwide sales of about EUR 3 billion. The sole owner of the holding company SMS GmbH is the Familie Weiss Foundation.

Source: SMS Group

Price Upturn Forecast in North American Stainless Steel Market in First Half of 2019

Posco Pohang Modernizes its Wire Rod and Bar-in-Coil Mill #2 with SMS Group

Posco Pohang
From left: Nam Kyu Go, EPI Procurement Section, POSCO; David Maurizio, Area Manager, Sales, SMS group; Hee-Jea Lee, Plant, Equipment & Materials Procurement Office, POSCO; Pierluigi Fenati, Legal & Compliance, SMS group.

 

Pohang Iron and Steel Company (POSCO), the fifth largest steel producer in the world and largest in Korea, has awarded SMS group the order to modernize its existing wire rod mill at its Pohang works. Quality, process and plant efficiency will be highlighted with the new pouring reel for special steels in South Korea.

The plant presently produces 540,000 tons per year of wire rod and bar-in-coils for automotive applications in the diameter range from 14 up to 42 millimeters with coils up to two tons.

The target of the modernization includes the replacement of some equipment along the mill (existing descaler and additional one on the rolling mill), a new cropping shear, a shiftable water cooling line, pouring reel machines with walking beam conveyor, cooling fans and hoods assuring in-line treatment of coils.

The project foresees to widen coiled round products up to 55 millimeters diameter and smaller products rolled at 22 meters per second. The mechanical areas will be connected with a scratch-free conveying system that, combined with the automation package supplied by SMS group, will grant POSCO a quality improvement on the rolled surface of the bars and a better coil shape and formation. Further implementations are the off-line simulation process with CCT® (Controlled Cooling Technology) and quick changing system of the water cooling line in less than five minutes to grant better plant efficiency. These features will give POSCO the possibility to better supply the automotive and special steels market.

This latest modernization project further underlines SMS group’s upgrade expertise and its position as a leading supplier of rolling mills for quality steels in all size ranges.

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